Echoes of Tunisia's unprecedented mass unrest are reverberating across the Arab world – which is watching in fascination as one of the most repressive regimes in the regions makes far-reaching concessions to people power.

Protests over rising food and fuel prices triggered emergency economic measures from Jordan to Libya and Morocco this week as dramatic scenes of street clashes in the small north African country fuelled official nervousness about a domino effect that could shake other authoritarian states short on jobs, hopes and freedoms.

The impact of Tunisia's unrest is all the greater because Zine al-Abidine Ben Ali – known to his long-suffering subjects as "Ben A Vie" ("president for life") – had been seen as one of the most effective of Arab autocrats. His announcement on Wednesday that he will not stand for another term is a huge boost for reform, whatever happens next.

The obvious contrast is with Egypt, the most populous of Arab countries. Hosni Mubarak, 82, who like Ben Ali keeps Islamists firmly out of power and tolerates only weak secular opposition, is seeking another presidential term next year- when he will mark three decades in power.

If Ben Ali, 74, is on his way out, that will be a democratic advance and a ringing wake-up call for a region where a trend towards republican dynasties – in Syria, Libya and Egypt – sits alongside the hereditary monarchies and emirates of the Gulf and Morocco.

Arab excitement has been maintained by al-Jazeera, the freest and feistiest TV channel in the region, which has broadcast riveting pictures of Tunisian crowds facing down well-equipped security forces. Twitter, Facebook and blogs have circumvented state censorship to provoke excited debate about the impact of the resonantly-named "Jasmine Revolt" or "youth intifada"– with its homage to Palestinian resistance to Israel.

"For all the other Arabs: thanks for your support," one exhilarated Tunisian tweeted. "Inshallah, freedom will be ours from the [Atlantic] ocean till the [Arabian] Gulf." Another message read: "To my Tunisian brothers and sisters: keep it up, all Arab peoples are watching you with admiration and envy."

Arab pundits often point bitterly to the contrast between the sympathy of western countries for the Iranian Greens and their normally firm backing for the Arab dictatorships. So US and British criticism of Ben Ali's repression has been greeted with delight. The Wikileaks revelations about the scathing private views of the US ambassador in Tunis were widely read across the region – and, some argue, even helped prepare the ground for the current unrest.

Viewed from the Arab world, Tunisia's problems are depressingly familiar. Algeria, which saw days of rioting and half a dozen dead earlier this month, is protected by its greater wealth – its energy a steadier earner than its smaller neighbour's tourism – though both are almost twice as rich as Syria, Morocco and Egypt.

All face the Arab scourge of having the highest unemployment rate worldwide – an average of 14.5% in 2007/2008, compared with an international average of 5.7% – and endemic corruption, cronyism and a lack of transparency and democracy. No wonder Ben Ali's fate and Tunisia's future are being so closely watched.

• This article was amended on 2 June 2011. The original said Neda Agha-Soltani was shot during a demonstration in Iran. This has been corrected.